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What is bankruptcy means testing?

 

Bankruptcy means testing is a mathematical formula used by bankruptcy attorneys to determine what type of bankruptcy relief a debtor can receive. Means testing was created by congress with the help of the credit card lobby to prevent bankruptcy abuse. The most likely mistake potential bankruptcy clients make is to first go online, late at night when they can’t sleep, and try to do means testing online. 95 percent of all San Diego residents who file bankruptcy wouldn’t fit the means test requirements online but still, qualify for bankruptcy. 0The bankruptcy means test is all about the math and how you put it together.

Means testing will determine if you can first even be considered as a candidate for a Chapter 7 bankruptcy, or if instead, you may be required to use a Chapter 13 case. This is an income-based means testing, and debtors who have income above the median income of their state are subject to the unpleasant limitations imposed by the Means Test. However, the analysis doesn’t end there; from the income on the Means Test, one gets to take certain deductions.

  • Taxes: You can deduct your tax obligations from your income on the means test as well.
  • Involuntary deductions: Deductions required for employment such as mandatory retirement plans, union dues, or uniforms.
  • Health, disability, or term life insurance
  • Secured debt payments These include payments on secured debts such as your mortgage or car loan. Even if your mortgage or car payment is above the national or local living standards, you can normally deduct it in full on the means test.
  • Court-ordered payments: If you are required to pay domestic support obligations such as alimony or child support, you can deduct these expenses on the means test.
  • Child care: Expenses for child care such as babysitting, daycare, or preschool.
  • Health care: If you incur more out-of-pocket health care costs (other than insurance) for you or your dependents than the allowed national standard, you may be able to deduct the actual amount you pay.
  • Education for employment or disabled child: You can deduct your education expenses if those expenses are required for your employment or for your mentally or physically disabled child.
  • Charitable contributions: If you regularly made charitable contributions prior to bankruptcy and expect to continue making those contributions, you can deduct them on the means test.
  • Care of elderly, chronically ill, or disabled: You can deduct the amount you contribute towards the care of an elderly or disabled family member or person in your household.

The Means Test determines if a bankruptcy petition must be assigned a “Presumption of Abuse” by the court. If your petition is assigned a presumption of abuse status, you must prove that your bankruptcy petition is not “abusive” or fraudulent. The rule of thumb so far, in practice, is that if the Means Test result is that “The Presumption of Abuse Arises,” it is extremely unwise to try and file the case as a Chapter 7. A bankruptcy attorney can properly do the Means Test for you and let you know what your options are. It’s a bad idea for you to rely on the so-called “Online Means Test Calculators” because the test is highly complex. The key to a thorough, accurate Means Test is not just getting in all the required income; it’s knowing how to apply bankruptcy law in figuring out how to maximize the allowable deductions. That is why just having a calculator isn’t going to do the trick.

Filing bankruptcy san diego

Filing bankruptcy in San Diego

Learn about filing bankruptcy in San Diego

Chapter 7 vs Chapter 13

What is Bankruptcy?  Bankruptcy is a legal petition filed in federal court which you may seek a discharge of a debt when you can’t pay your bills. There are two main bankruptcies for individuals: Chapter 7 and Chapter 13. Most people who are considering filing bankruptcy in San Diego are middle class . They own homes and usually have jobs but, not always. Without talking to a bankruptcy lawyer is is impossible to know if you qualify for Chapter 7 or Chapter 13

Here are the basics of a bankruptcy filing in San Diego:Chapter 7 vs Chapter 13 .

When Should I consider filing Bankruptcy in San Diego ? You should consider filing bankruptcy when you cannot pay your bills or when a particular crisis, such as an illness, accident or loss of employment makes the future payment of your bills very unlikely. Also, if a judgment is handed against you, a bankruptcy may be used to stop the creditor from attaching your assets or wages.

Can bankruptcy stop the collection of tax ?

Taxes are normally given priority and are difficult to erase.As a general rule, if you have an income tax debt that is at least three years old, and you filed your tax returns on time for the year in question, you may be able to discharge all such taxes in a Chapter 7 proceeding. In a Chapter 13, however, that tax debt would be paid in the same way as any other unsecured creditor (i.e., repaid over three years). Payroll taxes (i.e. taxes you failed to withhold from your employees’ pay or withheld and did not pay the appropriate government agency) are generally not dis-chargeable.Bankruptcy will initially stop the collection process but may not eliminate the obligation to pay the taxes. Does a Bankruptcy affect my credit? Yes. Future lenders may consider your bankruptcy when they are deciding whether to loan you money or credit. However, certain laws exist to prevent unlawful discrimination against you just because you filed for bankruptcy. The fact that you have filed for bankruptcy may be carried on your credit records for ten years.

Chapter 7  vs Chapter 13 If I choose Chapter 7 liquidation, do I lose all my assets?

No. Bankruptcy law lets individual debtors keep certain property that is not subject to attachment and execution under state law. These assets include some or all of the debtor’s equity in his or her home, household goods, a car, 401k  retirement plans and numerous other assets. Chapter 7 bankruptcy may enable you to get rid of all your unsecured debts.  In most cases, if you have barely enough to live on, not counting payment of your credit card (and other unsecured) debts, you can make all of your credit card debts go away. If, however, when you look at your monthly budget you have a significant amount of cash left over without paying your credit card (unsecured) debts, you will not be permitted to proceed with a Chapter 7 bankruptcy. Instead, you will be required to file a Chapter 13, also alternatively described as a “debt consolidation” or wage earner bankruptcy. In a Chapter 13 proceeding, the court will require you to pay, usually for three years, all of your disposable income to the bankruptcy trustee, who will in turn pay your creditors. The amount of your monthly payment to the trustee will be approximately equal to the amount of the cash you ordinarily have on hand after you pay your basic necessary living expenses. In many cases, you will not have to pay back everything that you owe. For instance, if you have $100,000.00 in unsecured debt, but you only have $500.00 per month of income available to pay the creditors, your unsecured creditors may receive a total of only $18,000.00 over a period of three years (that’s $500.00 multiplied by thirty-six months)

What is the cost to file a Bankruptcy in San Diego court : Chapter 7 vs Chapter 13 ?

In a Chapter 7, generally your attorney’s fees must be paid up front before the filing. This makes sense because in a Chapter 7 proceeding a promise made before filing the case to pay attorney’s fees after filing makes the promise dischargeable, too. In a Chapter 13, your attorney’s fees can be paid either before the filing or as part of the repayment plan. For Chapter 13 cases, the installment payment plan is the preferred choice of most clients since it requires less up-front cash.The filing costs differ based upon the Chapter of the Bankruptcy you file. Currently, fees are $306.00 for a Chapter 7 and $281.00 for a Chapter 13.

How long does a Bankruptcy take In San Diego : Chapter 7 vs Chapter 13?

Do I have to attend a Hearing? Chapter 7 bankruptcies require you to attend a meeting of creditors. If no objections are filed, the discharge can be entered in approximately 90 days. Chapter 13 bankruptcies take 48 months and may involve a number of hearings over an extended period with both the trustee and the court.

 Where do I file bankruptcy in San Diego

 In the federal bankruptcy district where you have lived for the past 180 days.  If you have not lived in your current District for 180 days, you may file in the district in which you most recently resided for one hundred eighty days or you can take your chances filing where you now live. If you are finally tired for the bill collectors and the stress,Call me 619-235-4095 we can talk.

paul staley bankruptcy lawyer
The Law Office Of Paul Staley provides legal advice and representation for residents of San Diego County. The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.
Paul Staley
Bankruptcy Attorney
1901 1st Ave., FLR 1 San Diego, CA 92101
Phone: +619 235 40 95
Email: pstaley@paulstaley.com

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